Branching morphogenesis is a fundamental program for tissue patterning. We show that active YAP, a key mediator of Hippo signaling, is distributed throughout the murine lung epithelium and loss of epithelial YAP severely disrupts branching. Failure to branch is restricted to regions where YAP activity is removed. This suggests that YAP controls local epithelial cell properties. In support of this model, mechanical force production is compromised and cell proliferation is reduced in Yap mutant lungs. We propose that defective force generation and insufficient epithelial cell number underlie the branching defects. Through genomic analysis, we also uncovered a feedback control of pMLC levels, which is critical for mechanical force production, likely through the direct induction of multiple regulators by YAP. Our work provides a molecular pathway that could control epithelial cell properties required for proper morphogenetic movement and pattern formation.